STATUTES AMENDMENT (REAL ESTATE REFORM REVIEW AND OTHER MATTERS) BILL

Second Reading

Adjourned debate on second reading (resumed on motion).

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Planning, Minister for Industrial Relations, Minister for Business Services and Consumers) (15:52): Over the period of the adjournment I have had brought to my attention—I have to say not surprisingly because most of these events begin in this way—a letter from the Law Society, and the letter from the Law Society, I assume by some means, has found its way into the hands of the Hon. Mr Wade in another place, who treats these as if they were edicts from some place beyond us all, whereas in fact it is only the Law Society, as much as I like them, lovely people.

Ms Chapman interjecting:

The Hon. J.R. RAU: Lovely people, but unlike His Holiness they are not infallible and they do occasionally come from a perspective of policy which, in my opinion, means that I am entitled to treat them like any other policy contestant, not treat them as an august body passing judgement on drafting and other technical matters. If, as I suspect, because Mr Wade has outsourced his thinking on most matters to the Law Society committees, it turns out to be that this is where it is all coming from, I do have some remarks that I think need be made and recorded here, and those remarks are basically this.

The Law Society is revealed from this correspondence to have a particular perspective on this matter and at least they do declare the perspective and the perspective is that of the vendor. The Law Society is basically saying, 'Look, you people have got far too carried away with the person you call the consumer, who is the potential purchaser of the property. We think you have got the balance completely wrong. You need to be worried about the vendor,' and so it is interesting. What they have done is basically said, not in so many words because that would be crass and unbecoming, 'We therefore endorse misleading and deceptive behaviour on the part of the vendor because it maximises the vendor's position,' which undoubtedly it does—

Ms Chapman: That's complete nonsense, John, and you know it.

The Hon. J.R. RAU: I will quote a passage from a particular document. This is from page 3 of a document, which I believe was sourced from the Law Society in the middle of last year. It goes like this:

The assumption behind these amendments—

which are the ones that the government proposes—

is that vendors always know from the outset what price [they] would accept for their property.

Just hold that thought for a moment and think about what that means. Let us move on:

To the contrary, the Society is of the view that many owners in fact do not know what their property is worth, and the marketing process can be vital to informing the vendor and assisting them determine what they may expect to receive. Many vendors' expectations are formed and/or varied in both directions during this marketing process.

So far, so good. It is okay, as long as—and here is the real error at the basis of this particular thinking, and at the basis of what I apprehend is the motivation that the Hon. Mr Wade has had for making these amendments. I do congratulate the Hon. Mr Wade for bringing them into this chamber for once, and I would like to thank the member for Goyder for that, because it is only when the member for Goyder gets his hands on a matter that we actually get an amendment in here. Well done, member for Goyder; I congratulate you, because you have been able to wring from the hands of the Hon. Stephen Wade something nobody else has ever been able to wring from those hands, which is an amendment presented to the lower house.

Mr GARDNER: Point of order: is the Attorney still quoting from the letter?

The DEPUTY SPEAKER: I think the Attorney has moved on from the quote.

The Hon. J.R. RAU: Yes, and I apologise to the member for Morialta; I should have said 'unquote' a little while ago. So, the member for Goyder has prised open the Hon. Stephen Wade's hands and snatched from them the amendments that he has been holding back, and at least we are seeing them in here. For that, I congratulate the member for Goyder, and I say 'thank you' most sincerely. I implore you to speak to your brothers and sisters and implore them to go to Mr Wade when he is fast asleep, prise those hands open and get those amendments out so we can actually talk about them down here, instead of sitting here—

The DEPUTY SPEAKER: Point of order, member for Bragg.

Ms CHAPMAN: I think that some licence is allowed in the debate about different views that are expressed, but I think a tirade against another member in another place and reflecting on them, especially in relation to the conduct of the debate, is totally out of order. I would ask you to bring the Attorney back to the subject matter in respect of this real estate reform.

The DEPUTY SPEAKER: I would not have really called it a tirade, and I do agree with your earlier analysis that we do allow some banter. I am sure the Attorney will take all of this into account and continue.

The Hon. J.R. RAU: Thank you, Mr Deputy Speaker. For the point of clarification, can I just make it clear to members opposite, who might be concerned about this, that I was not at all reflecting in an adverse fashion on the Hon. Stephen Wade, who, in the context of my remarks, we found fast asleep with amendments in his hand. He was asleep in my example, and therefore, no disrespect was meant to him. I was merely expressing my admiration for the skill of the member for Goyder to be able to get his hands open while he is still asleep and bring the amendments in here: that is what I was congratulating—

Ms CHAPMAN: Point of order.

The DEPUTY SPEAKER: Another point of order.

Ms CHAPMAN: This is a deliberate and offensive statement about a person in another place.

The DEPUTY SPEAKER: I am sure the Attorney is keen and willing to move on.

The Hon. J.R. RAU: I am keen to move on. 'Quote', member for Morialta:

The assumption behind these amendments is that vendors may know from the outset what the price would be necessary to accept for its property. To the contrary, the Society is of the view that many owners in fact do not know what their property is worth and marketing can be vital to informing the vendor—

Etc.; end of quote. You see, that is all well and good except that some people now, acting for the vendor who 'does not know from the outset what price it would accept' or is waiting for the 'marketing process to be vital in informing the vendor'—in other words, the vendor has no idea what the vendor wants—have no idea.

The opposition's amendments mean, nevertheless, an agent can stick any number it likes out there in circumstances where it is transparently false to advertise a property—for example, $500,000 plus—if in truth the vendor has not the slightest idea what the property is worth, is not able to say, 'My reserve is 700' or 'My reserve is 500' or whatever it is, and the agent cannot actually converse with the vendor and say, 'Look, I've looked at other properties and I think your property is worth about 500. What do you think?' The vendor answers, 'Well, I reckon it's worth more than that because I've got the terracotta flamingo on the front lawn and that's going to add value'—and they have that conversation.

What the Law Society is complaining about is the situation where the vendor has no idea at all—zero. That just underscores my whole point and the point of this legislation. How dare somebody who does not have any idea how much they want for the property—and they are genuinely in that position: they have no idea—put that property out and market that property for a price or a price range? How dare they do that?

Putting that out there is a complete misrepresentation because what it says to the hapless reader of our great metropolitan daily newspaper is that if you have $500,000 in your pocket you are in the hunt for this property. That is what it says. However, in the Law Society example, that person does not actually have any notion that $500,000 is anywhere near the number—no notion at all—and they have not recorded that in a sales agency agreement, they have not had a conversation with their agent or, if they have, they have said, 'Sorry, agent, we don't agree with you.' So it is alright then to put this bait number out there which, according to the letter the Law Society has sent, bears no resemblance to any known figure either by the agent or the vendor. It is sheer rubbish.

I ask those who would put forward these amendments: how is it in the interests of consumers that we as a parliament say it is really good for people knowingly to put rubbish numbers out there in respect of advertising for properties? How is that advancing the common good? I cannot see where the merit is in that. All we are trying to do in this arrangement is to achieve one thing, and that is to have some honesty and transparency in advertising about the sale price of real estate—that is all we are trying to do.

You might ask: why are we trying to do this? I will tell you why: because there are grubs out there who routinely put numbers in the newspaper in respect of properties that they know are wrong. They know those numbers are way below what their client will ever accept. They know that but they put them out there so that they can get all the tyre-kickers coming through and so that they can play all these games about marketing.

Marketing a property should not be some sophisticated version of a fly and spider game in a spider web. That is not how it should be. I do not care so much if we are dealing with a sophisticated commercial purchaser, if we are dealing with the Commonwealth Bank or Lend Lease or somebody like that—they are big enough and ugly enough to look after themselves. I am talking about the mums and dads who are buying a domestic property.

The fact is that the real estate industry acknowledges that this is a problem—that is a fact. The real estate industry acknowledges that some of their people are doing this, and they hate it, and rightly so. The real estate industry has told me it is absolutely baffled as to how to deal with it. I anticipate comments from the member for Bragg along these lines. The reason it is not simply a matter of going out there and prosecuting them is because to prosecute somebody you need something, and that something is called evidence. You need to be able to detect the offence and you need to have evidence of the offence. It is that simple.

What the government provisions do is provide that evidence, because there will be a record in writing which can be obtained by the relevant authorities at any time. They can have a look at that record and they can examine the conduct of the agent, and they can line up the conduct of the agent, the advertisements in The Advertiser, or anywhere else, and just compare whether what is in that document and what is being advertised lines up. That is what this is all about.

Now, this would not be necessary if everybody who is involved in the real estate industry was doing the right thing. And I have to place on the public record that I think most real estate agents are doing the right thing, and most of them want to do the right thing. I have consulted with a number of the more reputable ones in the context of putting this together and they are as concerned about this as I am. Their view on it is: 'We hate the fact that the public standing of real estate agents generally is being diminished by these grubs in our industry who are not being weeded out.' They don't like it, and nor should they.

The reform we are putting forward is only going to inconvenience the people who actually at the present time are getting an unfair market share as real estate agents because they are doing things which are below the standard that their colleagues are prepared to accept. It is going to hit those people because they are going to have to change their business model. They are going to have to start behaving ethically, so they are not going to like it, but for the rest of them it's not going to make much difference because the rest of them are doing the right thing. The rest of them are not playing this game. The rest of them are actually being fair and reasonable both to the vendor and to the prospective purchasers.

The other point I address from this letter is the idea that this is not a valuation. No, it is not a valuation: it is a price estimate. Nobody is holding the real estate agent who gives a guesstimate about price to that thing so that they can be sued if it is not 100 per cent right. They have to make reasonable efforts. It is not strict liability. All they have to do is prove that in coming to the number they have given to the vendor, as the suggested number, they have had regard to stuff like recent sales in the area, comparable homes, etc., etc. That is all they have to do. They just have to demonstrate they actually turned their mind to what is a comparable property for the purpose of giving some evidence-based information to the vendor.

The vendor is then in a position to say, 'Well, look, you might say my place is worth 550, or whatever, based on sales around this area, but you know what? I don't care. I'm not going to settle for less than six.' At the beginning it is then clear that six is the bottom line, so why should they be able to advertise for under six? Why, no matter how unreasonable that vendor might be? I quite like my place. I do not yet have one of those concrete flamingos on the front lawn, but I am looking for one, and if anyone knows where I can get one—

Mr Goldsworthy: A garden gnome.

The Hon. J.R. RAU: I do have a gnome; I have got one gnome, but it is a small one and I will take it with me if and when I go. By my reckoning the flamingo would become a fixture and therefore part of the property because you would have to cement it in.

Mr Griffiths: Unless it's excluded from the contract.

The Hon. J.R. RAU: Quite right, unless it's excluded from the contract. Now, I might come to the view that once I get that flamingo—I do believe, actually, there is a place somewhere on Mooringe Avenue that sells all sorts of large concrete animals but I have yet to see a flamingo there. I have seen hippos, rhinos, elephants—they seem to have an African bent; they do not seem to be into things from South America and whatnot. Anyway, I digress slightly.

The point is that once I got that out there I might come to the view that my property is worth another $150,000 because of the artistic merit of the front yard. That may not be shared by everybody. There may be some who look at that flamingo and say it is actually detracting from the place or think it is not worth a cracker, but if I am completely committed to the idea that that cement flamingo has enhanced the value of my place and I will not settle for any less because I have it there, then shouldn't the unwary potential purchaser know that I have this obsession about my front yard? Shouldn't that be part of the advertising? Why should it be advertised at a price everybody knows I won't accept? Why?

So, there are two things here. The agents are only being requested to do their best, given the available information, to give a fair rational estimate. They are not being held to it but they have to demonstrate that they have turned their mind in a reasonable way to fixing that number. The second thing is it does not exclude the fact that some vendors may be completely unreasonable in their expectations and, if they are, that should be reflected in the advertising. There is no point in having some silly arrangement where the unreasonable vendor has a price in the newspaper which is $200,000 or $300,000 below what they are prepared to accept. That is not helping anybody. The last point, I guess, that comes out of this letter is the unusual property. Yes, it is true; there are such things as unique properties, no question.

Mr Griffiths: For valuation purposes.

The Hon. J.R. RAU: For valuation purposes. There are properties that just have—and I think in the industry they call it the wow factor—something that is hard to define but you know it when you see it.

Mr Sibbons interjecting:

The Hon. J.R. RAU: Yes. It is impossible to explain but once you encounter it, you know you have encountered it, as with a number of other things but let's not go there. So, the wow factor—there are properties that do have that. Even though nobody is much interested in every other place on the street, that one they really like. It could be my flamingo again, it could be anything. Nobody is expecting the agent to be able to either predict with absolute certainty this property does have that or to be able to predict how big a lift will come out of that. That is not what this is about, so that is actually a furphy. All they have to do is make a reasonable effort, that is all, to put a number against the property.

Getting back to the point, if the agent takes reasonable steps to work out a comparable property valuation for this property, the agent is fine. If the agent tells that to the vendor and the vendor says, 'No, that is not enough. I want more than that for the property,' as long as the agent does not misrepresent that they have been told by the vendor that the vendor will accept less than the vendor in fact will, the agent is fine. If the property turns out to be one of those really special properties, the agent is still fine because they are by definition rarities and difficult to predict.

The only thing that is not fine is what the Law Society seems to think is okay, which is that you can advertise the property when the vendor has no idea what they want for it, apparently, at a price because by definition that is misrepresenting the vendor's position. If the vendor genuinely does not know what they want, how on earth are you able to advertise for a particular price when the person does not know what they want? It just does not add up. That is the problem.

I know that there are some people in the real estate industry who say that this is using a sledgehammer to crack a walnut. I have heard that a couple of times. But they have had a long time to deal with this. They have known it is a problem for a long time. I have invited them to give me a solution that would work; they have not. They all accept, I think, that this will make it a lot harder for people who are doing this underquoting business. They just do not like the way we do it.

In the end it comes down to this: are we serious about dealing with underquoting or aren't we? If we are not—look, there are other bits and pieces in here which are probably useful. A lot of this legislation is here because we have been asked by the industry to bring it in. A lot of this stuff is pro-real estate industry material. People should not get the impression that this is all just a big dump on the real estate sector; it is not. This is a mixture of things. We have reduced red tape for them, we have done all sorts of things which make their life easier.

All we are asking them to do in this space is to actually consider the fact that underquoting is an evil in the business. It is bad for their reputations and bad for the whole idea of there being open and reasonable conduct between people, and we are trying to get rid of it. With the greatest respect, the Law Society again has adopted a particularly partisan position, which is the position of the vendor, but in so doing has misconceived some of the elements in the legislation, most particularly the fact that they are only required to make a reasonable effort. There is no strict liability attached to this.

In winding up, I again congratulate the member for Goyder for having achieved what hitherto has been the unachievable and bringing forward amendments here. I congratulate the honourable member and I genuinely—and I am not being funny—appreciate the fact that when the member for Goyder is dealing with a matter he has the courtesy to come to this chamber and bring forward amendments so we can talk about those amendments in this chamber.

That is a courtesy that we seldom have extended to us by the Hon. Stephen Wade, who prefers to use the Pearl Harbor tactics in the other place. The first thing we know about it is we hear the words, 'Tora, tora, tora,' about 10 minutes before the bell rings in the other place when the amendments get rolled out. That is the first we hear about it. You can almost feel the Zeros going over your head. That happens to us week in, week out, month in, month out. To his great credit, the member for Goyder does not play it that way; he is a gentleman, and I congratulate him.

Bill read a second time.

Committee Stage

In committee.

Clause 1 passed.

Clause 2.

Mr GRIFFITHS: I move:

Page 3, line 2—Delete 'This Act' and substitute:

Subject to subsection (2), this Act

I am interested in the version of history that the minister just related. I find it rather interesting and I might take a few moments to put some things on the record, as he certainly has. I do recognise that before the luncheon adjournment I had not forwarded him a letter of the amendments I proposed. They were submitted, though, with the parliament on 20 February and I advised an officer who works for him that it was my intention to lodge amendments. We were scheduled to debate this bill some two weeks ago or thereabouts.

The Hon. J.R. Rau interjecting:

Mr GRIFFITHS: The Real Estate Industry provided me with a copy of the letter they forwarded to you on 21 February only on Monday, and that certainly sets the record. If you had the opportunity with your other commitments to be in the chamber for the whole time, you would have heard the positive way that we spoke about the need for the industry to be strong and vibrant and protective of all sides of it—purchaser and vendor. There is no doubt about that. All members spoke about that.

The amendment relates to the time of it coming into action. In my contact with the industry, they would prefer an opportunity to ensure that there is time for training that goes on with the people that are qualified to work with them. I have asked for a period of greater than six months I think it was. I am happy if it is 1 July, for example, but is the minister supportive of the amendment?

The Hon. J.R. RAU: I do not think the amendment is necessary. I can say and I place on the record that we will not insist on something within three months. We will consult with the industry about it. Whether it is four months, five months or six months is something I would not want to be nailed down to now, because I do not know exactly how long the training modules and so forth would take to be done. I will say now it will not be three months and therefore I do not believe the amendment is necessary and I oppose it for that reason only. I place on the record that we do not intend to sneak up on it.

Mr GRIFFITHS: Given that the minister has given a commitment that it will be no less than three months, I take by that it will be round about 1 July, potentially, then? I am prepared to accept that.

The Hon. J.R. RAU: We could certainly aim for that. I am advised there is some issue about getting regulations drawn up, but we will move along as swiftly as we can without catching the industry in such a position that they have no warning or ridiculously short time lines.

Mr GRIFFITHS: Given those commitments, I seek leave to withdraw the amendment.

Leave granted; amendment withdrawn.

Clause passed.

Clauses 3 to 5 passed.

Clause 6.

The Hon. J.R. RAU: I move:

Page 4, after line 12 [clause 6(2)]—After inserted subsection (1a) insert:

(1b) Nothing in subsection (1a) prevents the Court from exercising such other powers under this section as the Court considers appropriate in the circumstances.

Just to explain briefly, under the bill if disciplinary action is taken following the successful prosecution of a prescribed offence, the court must cancel the registration and disqualify the agent or sales rep from being registered. This amendment does not change the tenor of the bill, but it clarifies it in the two following respects. First of all, the court has the power to issue additional penalties. In other words, it is not simply either cancellation or nothing; it expands it out to either a reprimand or a prohibition.

Secondly, the court has the power to make disqualification either permanently, for a specified period, or until the fulfilment of stipulated conditions or until a further order. If the disqualification is not permanent, the registry will be able to apply to the Consumer and Business Services for a new registration, but will of course then be subject to the fit and proper person threshold. So it actually in effect is turning a rather blunt instrument into a more refined one.

Mr GRIFFITHS: The opposition confirms that in discussion with industry it is prepared to accept the amendment.

Amendment carried; clause as amended passed.

Clause 7 passed.

Clause 8.

Mr GRIFFITHS: I move:

Page 4, line 25—after '$300,000' insert '(excluding GST)'

This one relates to the figure that is quoted for small business. I referred in my second reading contribution to my interest in this, given that no definition was provided under the Small Business Commissioner Act as to what the size of a small business is. In real estate you have done that. I note you have increased it from $200,000 to $300,000, and the suggestion is to qualify for anybody who reads this that it is excluding GST. That is the suggestion. I am still keeping the $300,000 figure in place.

The Hon. J.R. RAU: I think that is entirely reasonable. We are not talking about the tax element, just the primary number.

Amendment carried; clause as amended passed.

Clauses 9 to 12 passed.

Clause 13.

Mr GRIFFITHS: I move:

Page 6, lines 33 to 40 (inclusive) [clause 13(5)]—Delete subclause 13(5)

This is the one I appear to be in a bit of trouble for, and there are a few amendments that are contingent upon the success of this one, too, so I note that. In my discussion with the Real Estate Institute, they provided me with a copy of a letter they sent to you on 21 February. They recognise that the change is going to occur, and I reinforce again that the institute wants to be professional in all the ways that it does things, but it did raise some level of concerns. Minister, I might take the opportunity just to read into the Hansard this letter to you from Mr Greg Troughton, chief executive officer, dated 21 February. The letter states:

The Real Estate Institute of South Australia has appreciated your personal time over the course of the past few months to discuss the practicalities of the proposed amendments to the Land and Business (Sale and Conveyancing) Act—

which is a slightly different act to the one we are talking about now.

It is strongly our view that we share common beliefs in the professional standard that all real estate practitioners should display, at all times.

Our recent discussions have focused on three issues—

and I believe those discussions were held on the day or the day before this letter was drafted to you. Point 1 states:

The requirement for the sales representative to insert a single figure in a Sales Agency Agreement at the time of listing the property for sale (previously this figure could be a range, not exceeding 10%). REISA acknowledges that the intent of inserting a single figure comes back to the need to more strongly monitor underquoting in the marketplace. However, REISA needs to highlight that a single figure could be interpreted as a valuation, when in fact, a sales representative is never qualified, or skilled, to provide such a service. Real estate sales representatives provide appraisals based on their local knowledge, and the final selling figure will always be dependent on current market conditions and the vendor's expectations. Whilst REISA remains concerned over the perception issue of an appraisal becoming something more in the eyes of a vendor, suitable words warning against this type of presumption could be placed into the Form R1 to try and minimise this very risk.

They continue with point 2:

Under the proposed changes, a vendor will not be permitted to set the reserve at an amount exceeding 110% of the single figure set down by the vendor in the Sales Agency Agreement. Limiting the right of the vendor to sell their property for an amount they are ultimately satisfied with, we believe is unfair and will erode vendor confidence in the auction system. Market conditions will always dictate the final selling price and intervening in this system will simply create a market where people feel limited in their methods of selling, to achieve the best final sale price. REISA strongly believes that the vendor should have the option of whether or not to make a price representation to the market and we are pleased that the proposed amendments respect this.

I understand that it has moved forward from what the original draft proposal was but I thought it was important to put that on the public record. It was the basis, indeed, for the amendments proposed by the Hon. Stephen Wade when he was the shadow minister and we have brought them here today.

I respect the fact that, from what you have said, they are not going to get up and you have a very strong divergent opinion against that, but it was important I think that I put on the record why the amendment was suggested and indeed the effort that the industry has made in discussions with you and representatives of the industry to try to reach an outcome situation.

I recollect your comment that you have posed the question to the real estate industry to come up with a solution on this. They have not necessarily been able to, so you put the position out there which is the 110 per cent nexus figure, but there is still a responsibility for me as now the shadow minister to put the amendment before you.

The Hon. J.R. RAU: As I said, I have spent a lot of time with REISA and, by and large, it has been very constructive. They are broadly supportive of what we are doing here, I think, everyone would agree. There is one element in the letter that the honourable member for Goyder just read out which is slightly misleading. I am not suggesting that he is misleading us but I am saying that the author of the letter is being misleading because it says something about forcing the vendor to sell their property for something less than they want to sell it for, or words to that effect.

Here is the critical thing: we do not anywhere in this legislation force the vendor to sell their property for any price unless they want to. The only thing we seek to regulate is the price that they advertise the property for, so all we are concerned about is fair and honest advertising. If, on the day, the vendor does not receive a price for the property that they want (we are talking here about an auction, I guess) then there is nothing in this legislation that deems them to have effected a sale to the highest bidder. If it has gone over the reserve then, as far as I understand the provisions, they are still in control of whether they sell their property.

The provisions that they are referring to govern how they can market the property. There is a distinction between those two things. We are not seeking to interfere in any way with any individual's capacity to sell their property at a price that they feel happy with, but we are seeking to regulate the price at which that property is advertised to the public. I know that is possibly a bit of a difficult distinction to draw up, but you need to remember that all of this business about 110 per cent and fixing a price is not designed to box in the vendor in respect of the price that they might receive or accept for their property.

What it is designed to do is to compel the agent, when advertising that property, to use a number in the advertisement which is relevant to either their view of the value of the property or, if it is higher, the vendor's view of the value of the property. That is all. It does not cramp the vendor's style in terms of what they must or must not accept at the auction.

Amendment negatived.

Mr GRIFFITHS: I move:

Page 7, lines 23 to 32 (inclusive) [clause 13(7), inserted subsection (6d)]—Delete subsection (6d)

This was about agency agreements for selling the property. I raised this during the second reading contribution, and I did it from the viewpoint of trying to find a balance between metropolitan and regional areas about what they need to do. In regional areas there might not be as many real estate agents within a community, and there might be a desire to have agreements roll over, especially because it might take more than 180 days for a property to sell if there is any level of flexibility.

In posing the question to myself, I thought probably one of the best of ways of doing it is by moving this amendment which removes subclause 7(a) that the agreement must not be extended more than once. So, that is the reason why it is in there and indeed to allow for an extension opportunity of a sales agency agreement where the particular situation creates it.

Now, I am not sure how that fits with legislation all the time. Practicality sometimes interferes with what the law says, but there are certainly issues that have been brought to our attention regarding regional real estate operators. The quote provided to us was that they have had to employ people to actually continue to chase up people for extension of agreements beyond the second one that you provide for. So, I am just wondering what your opinion is on that.

The Hon. J.R. RAU: It is a really good question, and I do acknowledge that in regional parts of the state, probably the reality on the ground is different. This certainly hasn't been framed with a view to making things awkward for people in regional parts of the state. The genesis of this goes back a long way to where there were in effect abuses of the system because the sales agency agreement would sort of operate almost perpetually.

Once upon a time, once one of these agreements had been entered into, it was very difficult to get out of it. So, the idea was basically that the agreement would have a limited lifespan and that at the end of that lifespan it would be incumbent on the agent to go back to their client and have a conversation with them. That was almost the main reason it was there. It was: you will talk to your client, otherwise you won't have a client anymore and you will converse with them at that point, not only about extending the agreement, but presumably if the client has got any concerns about how you are performing or anything else, you will have to do that in the context of getting an extension. There were abuses.

It used to get quite complicated because sometimes there would be people who were not aware that a former agent of theirs considered themselves still to be their agent. They would go off and would think, 'I haven't heard anything from that chap for a long time, but I still want to sell my house.' They would go to some other agent and sign up and then eventually the property is sold by the second agent, and they get the surprise of a lifetime when there is a knock at the front door from the first agent, like a ghost of Christmases past, 'Hello, remember me? I am here for my 6 per cent commission,' and the person's jaw drops and they say, 'Your what?' That is what we were trying to clean up.

I am happy to have a chat to the member for Goyder about whether or not there would be some way of addressing the matter that he raises between the houses. The only thing I would say is that I would be wary of amending the general provision so as to address his problem for fear of creating exactly the problem we were trying to defeat back again in the metropolitan area.

It might well be that there is some capability for us to consider a regime where certain parts of the state could be gazetted as different or something, I do not know. I am just thinking off the top of my head about that; maybe we can do something in that space. I do recognise the point that is made, but I would resist strongly interfering with the general provision because it was put there for a very good reason and it would cause a lot of trouble in the metropolitan area.

Mr PEGLER: Just on this one, doesn't (6a)(c) cover that aspect; that is, if there is to be an extension then it has to be in writing and signed 14 days prior to the present one running out. Why would you need (6a) in the first place? If an agent can roll it over every three months, but he has to have the agreement of the vendor and it has to be signed, I cannot see why you would have (6a)?

The Hon. J.R. RAU: That is a very good question. I am advised the reason it is constructed that way is that, as the honourable member for Mount Gambier would appreciate, some of these fellows are quite wily individuals and we discovered—

An honourable member interjecting:

The Hon. J.R. RAU: I know, that is shocking, some of them are—that apparently it was not beyond their ken to actually turn up on the first day when they signed up the person for the sales agency agreement and also to get them to sign the 90 day extension, and technically they have got what they need. As I said, one of the objects of this thing was to force the agent to come back again and sit down with the person and have a conversation with them. They had to have the chat about, 'Well, look do you really want me to keep working for you?' or 'I am not very happy with the way you are doing things,' or whatever it might be. In this space, nothing is perfect, but this is designed to make the agent, I guess, not take their client for granted.

Mr GRIFFITHS: I respect the fact that neither I nor the minister want unintended consequences to occur, and so if there is an opportunity for us to have a conversation between the houses I would take that.

The Hon. J.R. RAU: I would add it is the same for the member for Mount Gambier, if he wants to have a chat to me about this matter between the houses, I am happy to try to address in detail the matter that he is just raising.

Mr PEGLER: I make one point. It says that it can be no earlier than 14 days before the agreement is due to expire. Obviously an agent would be breaking the law if, when he did the first agreement, he also did the second agreement.

The Hon. J.R. RAU: Yes, that's why we put that in. We put that in to avoid the circumstance I mentioned before, which is that you get only the one visit but you've got two documents at the first visit.

Amendment negatived.

The Hon. J.R. RAU: I move:

Page 7, lines 25 and 26 [clause 13(7), inserted subsection (6d)]—Delete 'vendor must not make a new sales agency agreement with the same agent' and substitute:

agent must not make a new sales agency agreement with the vendor

I move this as printed and ask for it to be agreed to. Just by way of explanation: under the bill, the new subsection (6d) makes it an offence for the vendor to terminate or vary a sales agency agreement to reduce its duration and then to make a new sales agency agreement with the same agent specifying their selling price at an amount greater than that specified in the original agreement before the agreement is expired.

This is one of the provisions in the bill designed to eliminate the practice of underquoting. However, after further consideration, the government believes that the responsibility for this offence should rest on the agent rather than the vendor. This is due to the following reasons: firstly, the agent is the professional person contracted by the vendor to provide the service required for the real estate transaction; secondly, the agent has undergone the required training, and has the required expertise and depth of knowledge in handling the real estate transaction; and thirdly, the vendor relies on the agent's knowledge in handing the real estate transaction.

This reliance upon the agent's knowledge means that if the responsibility was in fact placed on the vendor they would invariably be able to rely upon the general defence under the Land and Business Agents Act to avoid prosecution. All the provisions in the bill relating to underquoting place the responsibility solely on the agent, not the vendor. The amendment therefore removes the responsibility from the vendor and places it upon the agent.

Mr GRIFFITHS: The opposition supports the amendment.

Amendment carried; clause as amended passed.

Clause 14.

The Hon. J.R. RAU: With regard to the government amendment to clause 14, page 8, after line 2, the government will not proceed with this amendment. This amendment was originally intended to circumvent the problem of verifying that an agent had in fact received another offer when disclosing that fact to a prospective purchaser. However, after further discussions with the industry—which I think could be fairly described as 'robust'—the government has decided that a better balance between the interests if the purchaser and vendor can be achieved, and this solution is canvassed in the next set of government amendments. I move:

Page 8, after line 22—After inserted subsection (2) insert:

(2a) Despite subsections (1)(e) and (2)(e), an agent (or a sales representative employed by the agent) may disclose to a purchaser the fact that an offer has been made if the following requirements are satisfied:

(a) the amount of the offer and any terms or conditions of the offer must not, at any time before the sale, be disclosed to the purchaser;

(b) a notice in writing confirming the fact that the offer was made must be provided, on request, to the purchaser;

(c) a copy of the notice must be kept as part of the agent's records.

(2b) An agent (or a sales representative employed by the agent) who, in making a disclosure of a kind referred to in subsection (2a), contravenes or fails to comply with a requirement specified in that subsection is guilty of an offence.

Maximum penalty: $5,000.

Expiation fee: $315.

Mr PEGLER: I have a question on the aspect that an offer has to be in writing. I will give you an example. A residential property had been on the market for 11 months and they wanted $390,000 for it. I made an offer of $375,000 over the phone to the agent. On the same day somebody else did the same thing for the same amount of money. The agent then rang the vendor and explained what had happened. This was all kosher and there is no doubt about the agent or the vendor whatsoever.

He then rang back to say that there had been another offer of the same amount and asked me if I wanted to up my offer, and he said the same to the other person. We both offered $395,000 each and then, of course, the agent had to tell the vendor that he had had two offers of the same amount again. Then they rang back and put it to us again. I offered $405,000 and the other person offered $420,000 so that person naturally got it. Where does that stand with this?

The Hon. J.R. RAU: That is quite an interesting story. There are a couple of things there. Just by way of observation if the honourable member is saying that the agent had disclosed either to him or to the other purchaser, during the context of the negotiations anyway, the actual amount that somebody else offered, that in and of itself is not correct behaviour. It is all right to say there is another offer, but until the offer has either been accepted or rejected or whatever you should not really be telling other people how much the offer is, because that is not appropriate under the legislation. The second thing I am looking at here is the situation where we are going to an auction and prior to the auction an individual says, 'Look, I'm prepared to offer $500,000 for this property.'

Mr PEGLER: This property was not going to auction; it was a private sale.

The Hon. J.R. RAU: A private sale, okay. I suppose that is a different kettle of fish to some extent, but this is primarily aimed at auctions—I beg your pardon. It does not matter, because the point is that an offer is made and the vendor is thinking of accepting the offer. The agent says to the vendor, 'Look, during the course of the opens we have had half a dozen other people who have expressed interest and to get the best outcome we should actually notify them because they may wish to make an offer as well.'

So what we are saying here is that in that context the agent can ring those other people and say, 'Look, you've got an interest in the property; there is another offer'—they cannot say what the offer is but that there is another offer—'and if you want to make an offer I suggest you get on with it and make it now.'

Then 2(ab) states a notice in writing confirming the fact that the offer was made must be provided on request to the purchaser and a copy of the notice must be kept as part of the agent's records. The reason for that is that we have been trying to avoid the situation where people make things up and try to, in effect, churn people by saying, 'Look, bid now or miss out' or, 'Put your money down now or miss out.' That could be a bluff and a game. What we are actually saying to the industry is that they can go through that ring around process if they like, but they better have proof that when they made those phone calls they were not just pulling those people's leg, because if they were that is an offence. That is the basis of it.

Again, an honest agent would not do that, but if you had some person who was not that concerned about behaving ethically they could just get on the phone and ring up everyone and say, 'Listen get your bids in now,' and basically try to panic people into doing things, which is not good practice if there was in fact no bid. This is more about having evidence. I did check this out the other day; I had a similar conversation with people about this. We do not mean by this an executed contract with a deposit and all that sort of stuff. What we mean is evidence in writing; it might even be an email. We are not necessarily saying it has to be signed. In your example, for instance, you could have emailed the agent.

Mr Pegler: We did do that.

The Hon. J.R. RAU: Right then; you're cool. That would come within this. It is just so that if later on there is an argument about whether or not it happened, somewhere or other there is a piece of paper with some date or time or something on it, which means that you can prove whether or not the agent was telling the truth when they made those phone calls.

Mr PEGLER: Just for the record, an email would suffice?

The Hon. J.R. RAU: Yes; we just want it in writing. We do not want to be in a situation where we have some argument going on where, 'I rang you.' 'No, you didn't.' 'Yes I did.' 'No, you didn't.' 'I rang you Thursday.' 'No, it was Tuesday.' We do not want to be in that situation. We just want to have something, and they have to keep it so later on if there is a problem we can just go to the filing cabinet and there it is.

Amendment carried; clause as amended passed.

Clause 15 passed.

New clause 15A.

Mr GRIFFITHS: I move:

Page 9, after line 23—After clause 15 insert—15A—Amendment of section 24G

Section 24G—after subsection (7) insert:

(7a) However, a person is not considered to obtain a beneficial interest in land or a business merely because the person is appointed as property manager in relation to the land or business.

While I respect the industry, you and everyone in this whole place, I want to ensure that the industry acts professionally. My desire is to ensure that when a person purchases a property via an agent, acting appropriately on behalf of a vendor, they are not precluded from the opportunity to also be appointed as property manager on the basis that it is an investment property. It is just an attempt to try to clarify some things. It is not an attempt to be mischievous. It is to try to ensure that the industry knows where it stands.

The Hon. J.R. RAU: Thank you. I understand the point. My advice is that this amendment is unnecessary; we don't support it for that reason. But we do not regard that there is any conflict in a person becoming a property manager because by reason of being a property manager they do not obtain a beneficial interest in the property. They are simply working as an agent or servant of the owner of the property and, therefore, we do not think this problem actually exists. For that reason and that reason alone we do not support the amendment because we do not think it is necessary because there is no risk of that person being caught.

Mr GRIFFITHS: I must admit the parliamentary counsel advice to me was quite similar to that and I understand the opinion that they put. I debated whether or not to even put the amendment but I just thought I would get from you on record what your position on that was, so I respect that.

Amendment negatived.

Remaining clauses (16 to 22) and title passed.

Bill reported with amendment.

Third Reading

The Hon. J.R. RAU (Enfield—Deputy Premier, Attorney-General, Minister for Planning, Minister for Industrial Relations, Minister for Business Services and Consumers) (16:56): I move:

That this bill be now read a third time.

Bill read a third time and passed.